The US central bank is widely expected to raise rates by 75 basis points, with the probability exceeding 80%
The dollar peaked at 110.25 last week to finish around 109.55 on Friday. At the start of the week, the USD index trades higher again as demand reemerged in anticipation of a two-day policy meeting by the Federal Reserve due on Tuesday and Wednesday. The US central bank is widely expected to raise rates by 75 basis points, with the probability exceeding 80%. Furthermore, strong inflation data and stubbornly high inflation in the United States suggest that there is a possibility of a more aggressive hike.
The DXY climbed back to the 110.00 mark on Monday, adding nearly 0.4% on the day as Treasury yields advance, pressuring the USD-denominated assets including gold. Adding to the upside pressure surrounding the buck, the euro keeps clinging to the lower end of the extended trading range, albeit holding above the 0.9950 support zone.
The shared currency has settled below parity at the start of the week, flirting with the 20-DMA, currently at 0.9990. EURUSD remains vulnerable to fresh losses in the near term, with the path of least resistance remaining to the downside while below at least the 1.0300 mark where the descending 100-DMA arrives.
Still, the US dollar is yet to overcome some critical levels, and the prices might not get to them until the Fed meeting this week. The immediate upside barrier now arrives at last week’s highs around 110.25, followed by the 110.55 intermediate resistance on the way to twenty-year tops registered in the 110.80 region earlier this month.
In case of a downside correction, the USD index could challenge the 109.50 zone, followed by the 109.30 support area and the 109.00 mark. Should the Fed deliver a hawkish hike on Wednesday, the greenback may challenge fresh multi-year tops this week. Otherwise, profit-taking could push the prices below 109.00.
